INTRODUCTION
INNOVATION, INFORMATION, AND THE POVERTY OF NATIONS
Robert Cooter
Sustained growth occurs in developing nations through improvements in markets and organizations. Entrepreneurial innovation resembles biological mutation that is unpredictable before it occurs and understandable afterwards. It is unpredictable because it begins with the innovator possessing private information by which he earns extraordinary profits. It is understandable because it ends with the public figuring out the innovation and profits approaching the ordinary rate of return. These characteristics of innovation have important consequences for law and policy to foster economic growth. Specifically, government officials who rely on public information cannot predict which firms or industries will experience rapid growth. Consequently, industrial policies that promote growth are unlikely to succeed. Proponents of industrial policy today make the same mistake as the mercantilists whose interventions Adam Smith attacked as a cause of national poverty. In contrast, secure property and contract rights, as well as effective business law (especially the laws regulating financial markets), create conditions under which competition naturally produces entrepreneurial innovation and nations become rich. The main obstacle to sustained economic growth in poor countries today is ineffective civil law.
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THE DEEP FREEZE: A CRITICAL EXAMINATION OF THE RESOLUTION OF FROZEN EMBRYO DISPUTES THROUGH THE ADVERSARIAL PROCESS
Angela K. Upchurch
Shortly prior to her marriage to David Litowitz, Becky Litowitz had a hysterectomy, rendering her unable to achieve pregnancy and give birth to a child. While Becky and David already had a child, they wanted to have more children during their marriage. To fulfill their dreams of expanding their family, Becky and David resolved to use artificial reproductive technology (ART). Becky and David underwent in vitro fertilization (IVF) therapy, during which eggs received from a donor were combined with David’s sperm to create five embryos, two of which were cryogenically preserved.
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CORRECTING THE EMPIRICAL FOUNDATIONS OF IPO-PRICING REGULATION
Royce de Rohan Barondes
Recent events are replete with stories of fraudulent or opportunistic behavior in the initial public offering (IPO) process—behavior that extended to the highest-reputation investment banks. Curiously, notwithstanding this evidence, recent financial economics literature asserts investment bank conflicts of interest “certify” IPO issuers.
This Article develops new empirical evidence that casts doubt on this “certification” hypothesis by examining the pre-IPO price adjustment of IPOs involving qualified independent underwriters (QIUs), particularly IPOs in which more than ten percent of the net proceeds are being directed to participating investment banks (for example, to repay a prior extension of credit). These offerings have similar pre-IPO-pricing patterns to those others interpret as involving certification. Investment bank exit, however, cannot comfortably be categorized as certification. These results, together with other recent results in the legal literature, support the view that factors other than “certification” account for IPO-pricing phenomena in IPOs involving investment bank conflicts of interest.
The SEC is finally considering important proposals put forward by the NASD and the NYSE to reform IPO marketing, albeit five years after the internet bubble in IPOs and other securities transactions burst. These results support increased disclosure-focused regulation of the IPO process.
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“THE ECONOMICS OF INCLUSIONARY ZONING RECLAIMED”: HOW EFFECTIVE ARE PRICE CONTROLS?
Benjamin Powell; Edward Stringham
Many areas of the United States are facing a housing affordability crisis, and the problem only seems to be getting worse. A family with average earnings cannot afford the median priced home in any of the thirty least affordable housing markets, and prices in the most expensive markets continue to rise. Between 1995 and 2002, median home prices rose by 65% in the San Francisco Bay Area, 62% in Boston, 54% in San Diego, and 49% in Denver. The areas with the worst affordability problems are typically clustered on the East and West Coasts, with twenty of the twenty-five least affordable metropolitan areas in California. Needless to say, such high housing costs preclude many families from being able to afford their own home.
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SPOUSAL SUPPORT DISORDER: AN OVERVIEW OF PROBLEMS IN CURRENT ALIMONY LAW
Jennifer L. McCory
Marriage has never been a relationship based solely on love and companionship—it has always primarily been an economic institution. In this institution, husbands and wives contribute to the marital union by earning wages, sharing resources, and making joint decisions regarding careers, purchases, and investments. Thus, some consider marriage an “economic partnership.” Although the term “partnership” suggests gender equality between husbands and wives, the term is misleading because partners to a marriage are typically not economically equal. A happy marriage may mask this inequality, but it becomes openly evident upon divorce.
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